Several times in recent years data collected by the U.S. Energy Information Administration for its weekly oil inventory report has had to undergo significant revisions because of inaccuracies reported by companies. Sometimes the information was off by more than two million barrels in each weekly survey, which is a “significant error considering that amount can account for the entire change in inventories from week to week.”

Internal emails and a report from a consulting firm prepared in September describe a process at the EIA that served the oil world well in 1983, the first year that oil futures traded, but hasn’t kept up as the inventory data have become more influential and the nation’s oil infrastructure has become more complex.

The division collects data from thousands of facilities, all reporting the number of barrels held in storage around the nation. But many of its systems haven’t been updated for 30 years, and much of the data input is done manually, according to one report commissioned for the EIA, prepared by consultants SAIC Inc. The consulting group directed questions to the EIA.

One example of how the data reporting errors played out:

For the week of Sept. 11, 2009, analysts expected oil inventories from the key Cushing, Ok., storage hub to drop by about 2.5 million barrels.

When the EIA reported its data the following week, on Sept. 16, it said inventories were actually down by 4.7 million barrels.

The EIA later released a correction, adding 1.7 million barrels back into the inventory. That meant the real withdrawal was actually in line with analyst expectations.

The EIA data is followed closely by the markets, although some research firms and the American Petroleum Institute compile their own weekly or monthly data on certain commodities. So numbers really do matter.

A number of companies and natural gas traders were fined — and some imprisoned — for reporting false numbers to trade publications that create widely followed price indexes. The arguments some made were that everyone did it, particularly Enron. But false data is still false data.

One Response

surprise! these idiot oil and gas traders are constantly trying to steal my jack at the pump. don’t trust a single one of them and certainly don’t trust the market that these guys try to manipulate solely to enrich themselves with our hard-earned money.